What is Pay-Per-Click?

June 29, 2009

Pay-per-click (PPC) advertising is when an advertiser pays for each qualified click that sends a search engine user (i.e., visitor) to the advertiser's web page. PPC requires the advertiser to bid on key words or key word phrases chosen by the advertiser. There are many PPC advertising services available to choose from. Google AdWords and Overture are probably the two most popular in use today.
The PPC search engine allows you to buy a top position in the search engine results for the particular keyword or phrase you choose. The PPC search engines can deliver targeted and qualified visitors to your web page at an economical advertising cost if you manage the program carefully with a clear objective. PPC provides the advertiser with assurance that their ad is being delivered to the targeted audience.
PPC advertising uses a bidding process where the highest bidder or highest activity value, depending on the search engine, for a particular keyword or phrase will receive the top placement on the search engine results page. The PPC search engine will place your ad text in a special location on the results page when a user searches on your PPC keyword or phrase search term.

As an example, Google AdWords appear on the right side of the search results page while the organic (i.e., natural) search results appear on the left side of the page. In the case of Yahoo! Search, the sponsored ads appear on both the left and right side of the search results page. The top 2-3 sponsored ads appear in the top positions on the left side above the natural search results and the next 3 sponsored ads appear at the bottom of the left side and on the right side of the search results page along with other sponsored ads.

PPC advertising is a good way to obtain web page visitors when you don't have a top ranking web page to get you the necessary natural search engine placement. Statistics show that over 80% of search engine users prefer the natural search results as opposed to sponsored ads. Nevertheless, the search engines deliver a huge amount of visitor traffic to the sponsored advertisers especially in the competitive keyword markets.

The typical PPC advertising campaign is based on the bid per click. For example, you bid $0.10 for a particular keyword or phrase that is accepted by the search engine. Whenever a search engine user clicks on your sponsored ad then you are charged $0.10 by the search engine. This amount is deducted from your account funds. Your placement in the search engine results page depends on the search engine. For Google, the placement is determined by your bid price and the ad's click-through activity. For Yahoo, the placement is determined by your bid relative to other bids.

PPC can be an excellent method for getting visitor traffic to your web site but it can also cost you a lot of money. You need to be extremely careful and monitor your cost of using PPC versus the revenue generated. As the old saying goes, do the math. Calculate your return on investment (ROI) on a continuous basis to determine if you are making a profit on your PPC campaign.

As an example, assume your bid for a particular keyword is $0.10 and the product you sell has a profit margin of $15 after product costs (excluding PPC costs). If your conversion rate (the number of visitors that buy your product) is 1.0%, only 1 of your visitors will buy your product out of 100 visitors. Your net profit for every 100 visitors from your PPC campaign will be $5 ($15 profit margin less $10 for PPC).

It is a good idea to experiment with the different PPC search engines to find the one that works best for you. In addition, you need to spend the necessary time and effort to select the keyword or keyword phrase that has a profitable conversion rate for your specific web page. A higher conversion rate implies more profits to you.

Try to avoid the senseless bidding war with your competitors. Seriously evaluate whether having the number one placement position is worth the PPC price you pay. What about position numbers two, three and so on. Will you get enough clicks in one of those positions to make your PPC campaign a success? Do not automatically assume that you have to be in position number one to make a lot of money using PPC. It all comes down to experimenting and testing.

There is no such thing as the perfect PPC campaign. Evaluate the performance of your PPC campaigns on a continuous basis. Are you leaving money on the table by not adjusting your PPC bid to a lower level? Should you increase the bid price to get more traffic? Is your conversion rate changing? What are your competitors doing? Should you be considering different keywords in your campaign? PPC advertising is a great way to get traffic but at a definite price. PPC requires a thorough knowledge of the PPC search engines that you use and constant monitoring and evaluation of your campaigns.

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Copyright (C) 2004 F. Terrence Markle – All Rights Reserved

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About The Author

Copyright (C) 2004 – F. Terrence Markle has worked for over 20 years with public and private companies. He has an MBA in marketing and finance. He has been involved with Internet-related businesses for over 3 years. His primary focus is the marketing of affiliate programs.